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OneCoin

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OneCoin logo on the door of their office building in Sofia, Bulgaria in 2016

OneCoin is a Ponzi scheme[1][2] promoted as a cryptocurrency by Bulgaria-based[3] offshore companies OneCoin Ltd (registered in Dubai) and OneLife Network Ltd (registered in Belize), both founded by Ruja Ignatova in concert with Sebastian Greenwood.[4] OneCoin is considered a Ponzi scheme due to its organisational structure and because of the previous involvement of many of those central to OneCoin in similar schemes.[5] It was described by The Times as "one of the biggest scams in history".[6]

US prosecutors have alleged the scheme brought in approximately $4 billion worldwide.[7] In China, law enforcement recovered 1.7 billion yuan (US$267.5 million) while prosecuting 98 people.[8] Ruja Ignatova disappeared in 2017 near the time a secret US warrant was filed for her arrest and was replaced by her brother, Konstantin Ignatov. Most of the leaders have now disappeared or been arrested, though Ruja Ignatova has not.[9] Greenwood was arrested in 2018,[10] as was Konstantin Ignatov in March 2019.[11] In November 2019, Konstantin Ignatov pleaded guilty to charges of money laundering and fraud. The total maximum sentence for the charges is 90 years in prison.[12]

Concept

According to OneCoin, its main business is selling educational material for trading. Members are able to buy educational packages ranging from 100 euros to 118,000 euros,[13] or, according to one industry blog, 225,500 euros.[14] Each package includes "tokens" which can be assigned to "mine" OneCoins. OneCoin is said to be mined by servers at two sites in Bulgaria and one site in Hong Kong. Each level (except six and seven), or package, gives new educational material, which is plagiarized from several sources.[15] However, in a typical OneCoin recruiting meeting, recruiters mainly talk about investing in cryptocurrency and the educational material is barely mentioned.[16][17]

The only way to exchange Onecoins for any other currency was OneCoin Exchange, xcoinx, an internal marketplace for members who had invested more than just a starter package. Onecoins could be exchanged for euros, which were placed in a virtual wallet from which they could be requested for wire transfer. The marketplace had daily selling limits based on which packages the seller had invested in, which greatly limited the amount of onecoins which could be exchanged.

On 1 March 2016, without notice, OneCoin issued an internal notice that the market would be closed for two weeks for maintenance, explaining that this was necessary due to the high number of miners and for "better integration with blockchain".[18] On 15 March 2016, the market opened again but no visible changes had been made; most of the transactions expired as before and daily limits stayed on.

The exchange was shut down without notice in January 2017, though individuals affiliated with the scheme continue to accept funds.[19][9]

Legal issues and criticism

The office of OneCoin in Sofia, Bulgaria in 2016

2015

On 30 September 2015, Bulgaria's Financial Supervision Commission (FSC) issued a warning of potential risks in new cryptocurrencies, citing OneCoin as an example.[20] After the warning, OneCoin ceased all activity in Bulgaria and started to use banks in foreign countries to handle wire transfers from participants.[21]

2016

In February 2016, the British newspaper Daily Mirror wrote that OneCoin / OneLife is a get-rich-quick scheme scam and a cult, calling it "virtually worthless".[22]

The company and the scheme is on the observation lists of many authorities; among them are authorities in Bulgaria, Finland,[13][23][24] Sweden,[25] Norway[26] and Latvia.[27] Authorities in many countries have warned of potential risks involved in businesses like OneCoin and undertaken prosecutions against persons linked to OneCoin, including CEO Ruja Ignatova and her brother Konstantin Ignatov.[28]

In March 2016, The Direct Selling Association in Norway warned against OneCoin, comparing it to a pyramid scheme.[4]

In December 2016, The Italian Antitrust Authority (Autorità Garante della Concorrenza e del Mercato) "adopted an interim injunction against the company One Network Services Ltd., active in the promotion and dissemination of cryptocurrency OneCoin...", and its representatives in Italy, describing their activities as an "illegal pyramid sales system" ("sistema di vendita piramidale vietato dalla legge"), and ordering them to cease promoting and selling OneCoin in Italy [29] On 27 February 2017, after concluding their investigation, AGCM banned all activity on OneCoin until further notice.[30]

In December 2016, the Hungarian Central Bank has issued a warning that OneCoin is a pyramid scheme.[31] And in China, several members and investors of OneCoin were arrested in 2016 and US$30.8 million of assets were seized.[32]

2017

In March 2017, the Croatian National Bank (HNB) advised the public to "exercise a high degree of caution" in decisions involving OneCoin, noted that OneCoin operations are not supervised by the HNB, and warned that possible losses will be fully borne by the investors.[33]

On 23 April 2017, Indian police arrested 18 people in Navi Mumbai for organizing a OneCoin recruitment event. The police attended the event undercover to judge the accusations before they decided to act. Further investigation has been started to reveal the higher levels of the pyramid.[34][35] In May, the investigation recovered Rs 24.57 crores ($3.49 million USD) in nine bank accounts. A further Rs 75 crores ($10.65 million USD) was transferred out before authorities were able to seize it.[36] Beginning of May, two more people were arrested and Rs 24 crores ($3.41 million USD) were seized from bank accounts. A special investigation team was formed with four Assistant Police Inspectors and 15 personnel under Senior Police Inspector Shivaji Awate to follow the money trail for further arrests.[37]

On 27 April 2017, Germany's Federal Financial Supervisory Authority (BaFin) issued cease & desist orders to Onecoin Ltd, Dubai, and OneLife Network Ltd, Belize.[38] The Authority concluded that trading in OneCoins was fraudulent "own funds" trading.[38]

On 28 April 2017, Bank of Thailand issued a warning against OneCoin, stating it was an illegal digital currency and that it should not be used in trade.[39]

On 29 May 2017, International Financial Services Commission of Belize (IFSC) issued a warning about OneLife Network Ltd conducting trading business without license or permission from IFSC or any other authority. OneLife Network Ltd was directed to cease and desist from carrying on with the illegal trading business.[40]

On 16 June 2017, the CEO of OneCoin Ltd. claimed OneCoin was licensed by the Vietnamese government, that it was legally permissible to use them as a digital currency and that it was the first cryptocurrency in Asia officially licensed by any government.[41] On 20 June 2017, Vietnam's Ministry of Planning and Investment (MPI) issued a statement that the document which OneCoin used as proof was forged. They stated that the document was against the MPI regulations and that the person who supposedly signed the document was not in the position claimed by the document at the time when the document was created. MPI warned individuals and enterprises to be vigilant if they encounter the document during business.[42][41]

On 10 July 2017, Ruja Ignatova, the CEO, was charged in India with duping investors as a part of the Indian investigation.[5]

2018

On 17 and 18 January 2018, Bulgarian police raided OneCoin's office in Sofia at the request of the prosecutor's office in Bielefeld, Germany. German police and Europol took part in the bust and the investigation. Also 14 other companies, tied to OneCoin, were investigated and 50 witnesses were questioned. OneCoin's servers and other material evidence were seized.[43]

On 3 May 2018, the Central Bank of Samoa (CBS) banned all foreign exchange transactions related to OneCoin and OneLife.[44] The bank had earlier in March issued a warning about OneCoin.[45] CBS describes OneCoin as a very high risk pyramid scheme.

2019

On 21 November 2019 the New York Federal Court found lawyer Mark Scott guilty of money laundering and bank fraud for his role in routing US$400m out of the US.[46]

On 24 November 2019 the BBC published a detailed investigation of OneCoin and Ignatova titled Cryptoqueen: How this woman scammed the world, then vanished. The reporters believe that Ignatova resides in Frankfurt under a false identity.[47]

2020

In 2020 the FinCEN Files showed that BNY Mellon processed $137M for Entities Linked to OneCoin.[citation needed]

See also

Further reading

  • DOJ Staff (8 March 2019). "Manhattan U.S. Attorney Announces Charges Against Leaders Of 'OneCoin,' A Multibillion-Dollar Pyramid Scheme Involving the Sale of a Fraudulent Cryptocurrency". New York, NY: Department of Justice (DOJ), U.S. Attorney's Office, Southern District of New York. Retrieved 17 February 2020 – via Justice.gov.
  • The Missing Cryptoqueen. Podcast, BBC, since 2019.
  • Philipp Bovermann: Die verschwundene Königin. In: Süddeutsche Zeitung, 25. September 2020 (German, Paywall).

References

  1. ^ Morris, David Z. (31 May 2017). "The Rise of Cryptocurrency Ponzi Schemes". The Atlantic. Retrieved 5 June 2017.
  2. ^ "Survey: Malaysians Warm Up to Cryptocurrencies". nasdaq. Retrieved 5 June 2017.
  3. ^ "'Cryptoqueen' brother admits role in OneCoin fraud". 14 November 2019 – via www.bbc.com.
  4. ^ a b "Vil ikke være politi". direktesalgsforbundet.no. direktesalgsforbundet.no. Retrieved 25 March 2016.
  5. ^ a b "indian police label 12 million onecoin operation a clear ponzi scheme". The Indian Express. 10 July 2017. Retrieved 10 July 2017.
  6. ^ Bartlett, Jamie (15 December 2019). "The £4bn OneCoin scam: how crypto-queen Dr Ruja Ignatova duped ordinary people out of billions — then went missing". The Times.
  7. ^ "US fed prosecutor tells court OneCoin is a $4 billion Ponzi scheme". behindmlm.com. Retrieved 28 January 2019.
  8. ^ Yang, Yingzhi (29 May 2018). "China prosecutes 98 people, recovers US$268 million in OneCoin cryptocurrency investigation, report says". South China Morning Post. Retrieved 29 May 2018.
  9. ^ a b Marson, James (27 August 2020). "OneCoin took in billions. Then its leader disappeared". FN. Retrieved 27 August 2020.
  10. ^ NGAMKHAM, WASSAYOS (8 November 2018). "Cops take new tack as crime goes global". Bangkok Post. Retrieved 12 March 2019.
  11. ^ "Manhattan U.S. Attorney Announces Charges Against Leaders Of "OneCoin," A Multibillion-Dollar Pyramid Scheme Involving The Sale Of A Fraudulent Cryptocurrency". Justice.gov. United States Department of Justice. Retrieved 12 March 2019.
  12. ^ "Cryptoqueen brother admits role in OneCoin fraud". BBC News. 14 November 2019. Retrieved 19 November 2019.
  13. ^ a b YLE (14 March 2016). "Finns investing millions in new virtual currency; police keeping tabs on case".
  14. ^ "OneCoin investment packages approach a quarter million Euros". Behind MLM. 18 October 2016. Retrieved 26 September 2019.
  15. ^ Petteri Järvinen (29 May 2015). "OneCoin-koulutusmateriaali kopioitu kirjoista" (in Finnish).
  16. ^ "OneCoin valtaa Aasiaa" (in Finnish). 1 March 2016. Archived from the original on 17 November 2017. Retrieved 20 May 2016.
  17. ^ Penman, Andrew (10 February 2016). "Here's why hyped-up web currency OneCoin is virtually worthless". mirror. Retrieved 10 January 2018.
  18. ^ "OneCoin - Uusi pyramidihuijaus? KRP: Rikosta voidaan arvioida luotettavasti vasta myöhemmin". 2 March 2016. Retrieved 24 March 2016.
  19. ^ "OneLife suspend OneCoin withdrawls, affiliates can't cash out". 15 January 2017.
  20. ^ FSC (30 September 2015). "СЪОБЩЕНИЕ – OneCoin" (in Bulgarian).
  21. ^ "OneCoin lose last bank account, unable to accept wires". behindmlm.com. Retrieved 15 November 2016.
  22. ^ "Who wants to be a OneCoin millionaire? YOU don't - here's why hyped-up web currency is virtually worthless". Archived from the original on 12 February 2016.
  23. ^ Poliisi (11 April 2015). "KRP ON SELVITTÄNYT ONECOIN-VIRTUAALIRAHAA" (in Finnish).
  24. ^ Helsingin Sanomat (4 November 2015). "Krp ei aloita tutkintaa Onecoin-valuutasta – kehottaa silti erityiseen varovaisuuteen" (in Finnish).
  25. ^ Lotteri Inspektionen (27 January 2016). "OneCoins verksamhet polisanmält för misstänkt brott mot lotterilagen" (in Swedish).
  26. ^ direktesalgsforbundet.no (3 March 2016). "Vil ikke være politi" (in Norwegian).
  27. ^ "FKTK brīdina par OneCoin sniegtajiem pakalpojumiem" (in Latvian). 11 March 2016.
  28. ^ "Manhattan U.S. Attorney Announces Charges Against Leaders Of "OneCoin," A Multibillion-Dollar Pyramid Scheme Involving The Sale Of A Fraudulent Cryptocurrency". United States Department of Justice. U.S. Attorney's Office, Southern District of New York. Retrieved 17 February 2020.
  29. ^ "PS10550 - Vendite piramidali: sospesa in via cautelare la promozione della criptomoneta OneCoin". agcm.it. Archived from the original on 31 December 2016. Retrieved 30 December 2016.
  30. ^ "PS10550 - Vendite piramidali: Antitrust sospende la promozione della criptomoneta OneCoin da parte di One Life". agcm.it. Archived from the original on 8 May 2017. Retrieved 12 March 2017.
  31. ^ "Fokozott kockázatot hordoznak a világhálón elérhető virtuális fizetőeszközök (in Hungarian)". mnb.hu. Retrieved 22 December 2016.
  32. ^ behindmlm.com (27 April 2016). "Chinese authorities investigating OneCoin, investors arrested".
  33. ^ "OneCoin product carries many risks". hnb.hr (Press release). Croatian National Bank. 7 March 2017. Retrieved 25 September 2017.
  34. ^ The Hindu (25 April 2017). "18 held for organising Ponzi scheme seminar".
  35. ^ The Afternoon (25 April 2017). "Raid on OneCoin, brings out lakhs of coins". Archived from the original on 26 April 2017. Retrieved 27 April 2017.
  36. ^ "OneCoin fraud: Cops recover Rs 24 crore from 9 banks". Times of India. 13 May 2017. Retrieved 13 May 2017.
  37. ^ The Hindu (18 May 2017). "2 more held in OneCoin scam".
  38. ^ a b "Onecoin Ltd (Dubai), OneLife Network Ltd (Belize) und One Network Services Ltd (Sofia/Bulgaria): BaFin issues cease and desist orders holding the companies to stop own funds trading in "OneCoins" in Germany". BaFin Federal Financial Supervisory Authority. Bundesanstalt für Finanzdienstleistungsaufsicht. Retrieved 19 December 2019.
  39. ^ Bangkok Post (28 April 2017). "BoT warns public about OneCoin currency".
  40. ^ IFSC (29 May 2017). "One Life Network Limited". Archived from the original on 8 September 2017. Retrieved 30 May 2017.
  41. ^ a b Behind MLM (20 June 2017). "OneCoin Vietnamese regulatory document forged, govt says".
  42. ^ Báo Đấu thầu (20 June 2017). "Cảnh báo việc giả mạo văn bản của Bộ Kế hoạch và Đầu tư, Cục Quản lý đấu thầu" (in Vietnamese).
  43. ^ The Sofia Globe. "Bulgarian special prosecutors join in anti-money laundering operation against OneCoin". Retrieved 19 January 2018.
  44. ^ Central Bank of Samoa (21 March 2018). "CENTRAL BANK OF SAMOA BLOCKS ALL ONECOIN CRYPTOCURRENCY TRANSACTIONS".
  45. ^ Central Bank of Samoa (21 March 2018). "Warning on ONECOIN Cryotocurrency".
  46. ^ "OneCoin lawyer found guilty in 'crypto-scam'". BBC News. 21 November 2019. Retrieved 24 November 2019.
  47. ^ "Cryptoqueen: How this woman scammed the world, then vanished". BBC News. 24 November 2019.